Have equity in your home? Want a lower payment? An appraisal from Gregory James Company, Inc. can help you get rid of your PMI.
When purchasing a home, a 20% down payment is usually the standard. The lender's liability is oftentimes only the difference between the home value and the amount remaining on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and regular value variations on the chance that a borrower is unable to pay.
During the recent mortgage boom of the last decade, it was widespread to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender endure the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplementary plan guards the lender in case a borrower defaults on the loan and the market price of the home is lower than what the borrower still owes on the loan.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible. Unlike a piggyback loan where the lender absorbs all the damages, PMI is favorable for the lender because they obtain the money, and they get paid if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer avoid paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law guarantees that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, acute home owners can get off the hook a little earlier.
It can take many years to arrive at the point where the principal is only 20% of the initial amount borrowed, so it's important to know how your home has appreciated in value. After all, any appreciation you've gained over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home could have acquired equity before things calmed down, so even when nationwide trends hint at plunging home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It is an appraiser's job to know the market dynamics of their area. At Gregory James Company, Inc., we know when property values have risen or declined. We're experts at identifying value trends in Cedartown, Polk County and surrounding areas. When faced with data from an appraiser, the mortgage company will generally eliminate the PMI with little effort. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: